Cedar Fair expecting attendance, income dip
5/15/2009SANDUSKY - With Cedar Point ready to open for the season tomorrow, the chief executive of the amusement park's parent company warned stock owners yesterday that the season could be more Demon Drop than rocket ride.
Park attendance and revenues likely will fall this year at Cedar Fair LP, Richard Kinzel told 125 people who attended the firm's annual shareholders meeting at the Sandusky State Theatre. Besides Cedar Point, Cedar Fair operates 10 amusement parks and six water parks in the United States and Canada.
Already, some struggling firms have canceled company picnics scheduled for Cedar Fair's flagship park in Sandusky.
The culprit: the economy. The company, which operates as Cedar Fair Entertainment Co., has been hard-hit by turmoil in the auto industry, he said, explaining that more visitors come from Detroit than anywhere else. Cleveland and Toledo, which also have struggled in the recession, are also key markets.
But in a reassuring note, Mr. Kinzel told stock owners: "We're going to make it through 2009."
"You have the full dedication of this management team to see that this crisis is overcome," Mr. Kinzel said.
The firm, whose stock trades under the symbol FUN, made $5.7 million last year on revenues of $996 million.
The chief executive had few comforting words for stock owners looking for a quick restoration of the firm's distribution, which was slashed March 9 to $1 a share each year from $1.92.
The firm must first pay down and arrange for refinancing of $1.7 billion in debt, which comes due in 2012. And while there are no plans for more dividend cuts, the CEO acknowledged the firm's lenders could order a cut if Cedar Fair doesn't meet income requirements in its loan agreements.
Cedar Fair shares trade at about $11 each on the New York Stock Exchange, but have fluctuated between $5.75 and $25 over the past 52 weeks.
During a question-and-answer period, a shareholder claimed the $1.2 billion purchase of Paramount Parks was a key factor in debt problems and the stock slide.
Mr. Kinzel defended the acquisition, saying Cedar Fair was overly reliant on revenues from Cedar Point, which depends on business from struggling Midwest industrial hubs.
With the new parks, Cedar Fair expanded to faster-growing areas such as Charlotte and Toronto, he said.
And while the price tag may seem high now, it represented going rates for such properties at the time, he added. "Companies have to grow," he added.
He said Cedar Fair, like other firms, is a victim of the economic crisis that began to take hold of national economies worldwide last fall. "Unfortunately, times have changed," he said. "The world has changed. There is no money out there. The debt markets have dried up."
While acknowledging that park attendance will likely drop this summer, he was unwilling to speculate about the size of the decline.
Cleveland residents Ronald and Marge Pring, who live part-time in Port Clinton, said after the meeting that they don't plan to sell their 50,000 shares.
"We have to sit tight and wait a while," she said.
Contact Gary Pakulski at:
gpakulski@theblade.com
or 419-724-6082.